CAZALY RESOURCES LIMITED — AGM Information 2004

Sep 6, 2004

ACN 101 049 334

NOTICE OF ANNUAL GENERAL MEETING

samed.

EXPLANATORY STATEMENT

and

PROXY FORM

DATE AND TIME OF MEETING:

5 October 2004 at 10.00 am

VENUE: Celtic Club

48 Ord Street, West Perth, Western Australia 6005

These documents should be read in their entirety. If shareholders are in any doubt as to how they should vote, they should seek advice from their accountant, solicitor or other professional advisor.

Eszaly Resources Limited
ABN 23 101 049 334

CONTENTS

Notice of Meeting
Explanatory Statement	6
Proxy Form	I 7

Eagaly Resources Limited
ABN 23 101 049 334

NOTICE OF MEETING

Notice is hereby given that the Annual General Meeting of the members of Cazaly Resources Limited ("Cazaly" or the "Company") will be held at the Celtic Club, 48 Ord Street, West Perth, Western Australia 6005, at 10.00am, 5 October 2004.

The Explanatory Statement that accompanies and forms part of this Notice of Meeting describes in more detail the matters to be considered.

AGENDA

ORDINARY BUSINESS

To receive and consider the financial report of the Company for the year ended 30 June 2004 and the reports by directors and auditors thereon.

To consider and, if thought fit, to pass, with or without modification, the following ordinary resolutions:-

ī. Ordinary Resolution I: To re-elect a Director

To re-elect as a director Mr Kent M Hunter who retires in accordance with Clause 12.2 of the Company's Constitution and, being eligible, offers himself for re-election.

$2.$ Approval to the Future Placement of Shares

To consider and, if thought fit, to pass, with or without modification, the following ordinary resolution:

"That, for the purposes of ASX Listing Rule 7.1 and for all other purposes, this meeting approves and authorises the Directors to issue and allot up to 10,000,000 Shares at an issue price of not less than 80% of the average market price for the Shares on ASX over the last 5 trading days on which sales in the Shares were recorded before the date of the prospectus in relation to the proposed issue and otherwise on the terms and conditions set out in the Explanatory Statement accompanying this Notice of Meeting."

• $\mathbf{L}$ Prior to making a decision with respect to Resolution 2, members should refer to Section 2 of the Explanatory Statement which accompanies this Notice of Meeting.
• In accordance with ASX Listing Rule 7.3.8, the Company will disregard any votes cast on Resolution 2 by any person who may $\overline{2}$ participate in the proposed issue and any person who might obtain a benefit, except a benefit solely in the capacity of the security holder, if resolution 2 is passed and any person associated with those persons. However, the Company need not disregard a vote if it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form or it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

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Eagaly Resources Limited
ARN 93 101 010 334

$\mathbf{R}$ Grant of Directors Options To Mr McMahon

To consider and, if thought fit, to pass, with or without modification, the following ordinary resolution:

"That for the purposes of Part 2E.1 of the Corporations Act and ASX Listing Rule 10.11, and all other purposes, this meeting hereby approves and authorises the Directors to grant within one month of the date of this Meeting 1,000,000 Director's Options to Mr McMahon (or his nominee) on the terms and conditions set out in the Explanatory Statement that forms part of this Notice of Meeting.'

• Prior to making a decision with respect to Resolution 3, members should refer to Section 3 of the Explanatory Statement which $\mathbf{L}$ accompanies this Notice of Meeting.
• The Company will disregard any votes cast on Resolution 3 by Mr McMahon or any associate of Mr McMahon. However, the $\mathfrak{D}$ Company need not disregard a vote if it is cast by such a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form, or if it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy for to vote as the proxy decides.

$\ddot{4}$ . Grant of Directors Options To Mr Jones

To consider and, if thought fit, to pass, with or without modification, the following ordinary resolution:

"That for the purposes of Part 2E.1 of the Corporations Act and ASX Listing Rule 10.11, and all other purposes, this meeting hereby approves and authorises the Directors to grant within one month of the date of this Meeting 1,000,000 Director's Options to Mr Jones (or his nominee) on the terms and conditions set out in the Explanatory Statement that forms part of this Notice of Meeting"

• Prior to making a decision with respect to Resolution 4, members should refer to Section 4 of the Explanatory Statement which $\mathbf{L}$ accompanies this Notice of Meeting.
• $\mathbf{a}$ The Company will disregard any votes cast on Resolution 4 by Mr Jones or any associate of Mr Jones. However, the Company need not disregard a vote if it is cast by such a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form, or if it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy for to vote as the proxy decides.

5. Grant of Directors Options To Mr Hunter

To consider and, if thought fit, to pass, with or without modification, the following ordinary resolution:

"That for the purposes of Part 2E.1 of the Corporations Act, and ASX Listing Rule 10.11, and all other purposes, this meeting hereby approves and authorises the Directors to grant within one month of the date of this Meeting 250,000 Director's Options to Mr Hunter (or his nominee) on the terms and conditions set out in the Explanatory Statement that forms part of this Notice of Meeting"

• Prior to making a decision with respect to Resolution 5, members should refer to Section 5 of the Explanatory Statement which $\mathbf{I}$ accompanies this Notice of Meeting.
• З. The Company will disregard any votes cast on Resolution 5 by Mr Hunter or any associate of Mr Hunter. However, the Company need not disregard a vote if it is cast by such a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form, or if it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy for to vote as the proxy decides.

Olotic of Ellecting

Eagaly Resources Limited

PROXIES

$\mathbf{I}$ . A member entitled to attend and vote at a meeting of the Company is entitled to appoint not more than two proxies to attend and vote instead of the member. If two proxies are appointed, and a member does not specify the proportion or number of the member's votes each proxy may exercise, each proxy may exercise half the votes. A proxy need not be a member of the Company.

In order to vote on behalf of a company that is a shareholder of Cazaly, a valid Power of Attorney in the name of the attendee, must be either lodged with the Company prior to the Meeting, or be presented at the Meeting before registering on the attendance register for the Meeting.

Forms to appoint proxies, and the Power of Attorney (if any) under which they are signed, must be lodged at the registered office of the Company at 22 Oxford Close, LEEDERVILLE, WA, 6007, or by facsimile (61-8) 9381-5911 not less than 48 hours before the time of the Meeting or resumption of an adjourned meeting at which the person named in the instrument proposes to vote.

• 1. An instrument appointing a proxy:
• a) shall be in writing under the hand of the appointor or of his attorney, or if the appointor is a corporation, either under seal or under the hand of a duly authorised officer or attorney;
• b) may specify the manner in which the proxy is to vote in respect of a particular resolution and, where an instrument of proxy so provides, the proxy is not entitled to vote on the resolution except as specified in the instrument:
• c) shall be deemed to confer authority to demand or join in demanding a poll;
• d) shall be in such form as the Directors determine and which complies with Section 250A of the Corporations Act 2001:
• e) proxies appointing the Chairman which do not specify the way in which the proxy is to vote on a particular resolution will be recorded as voting in favour of the resolutions.

ATTENDANCE AND VOTING ELIGIBILITY

For the purpose of regulation 7.11.37 of the Corporations Regulations 2001, the Directors have determined that Shares held at 5.00pm WST on 1 October 2004 will be taken, for the purposes of this Annual General Meeting, to be held by the persons who held them at that time.

BY ORDER OF THE BOARD

Kent M. Hunter Director/Company Secretary Dated: 27 September 2004

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5

Eagaly Resources Limited
ABN 23 101 049 334

EXPLANATORY STATEMENT

INTRODUCTION

É.

This Explanatory Statement has been has been prepared for the information of Shareholders of Cazaly Resources Limited (Cazaly or the Company) in connection with Resolutions I to 5 of the Annual General Meeting of members to be held at the Celtic Club, 48 Ord Street, West Perth, Western Australia 6005, at 10.00am, 5 October September 2004.

This Explanatory Statement should be read in conjunction with the accompanying Notice of Meeting. Please refer to Section 6 of this Explanatory Statement for a glossary of terms.

$\mathbf{L}$ RESOLUTION 1: TO RE-ELECT A DIRECTOR

Resolution 1 seeks approval for the election of Mr Kent M Hunter, who retires in accordance with Clause 12.2 of the Company's Constitution and, being eligible, offers himself for re-election as a Director of the Company, with effect from the end of the meeting.

Mr Hunter is a Chartered Accountant with over 10 years' experience as a Director and Company Secretary to resource companies listed on ASX. Kent has experience in capital raisings, ASX compliance and regulatory requirements and is currently a Non-executive Director of ASX listed gold explorer Gryphon Minerals Limited and ASX listed oil and gas explorer Elixir Petroleum Limited.

RESOLUTION 4 - APPROVAL FOR FURTHER FUTURE PLACEMENTS $\overline{2}$ .

Resolution 2 seeks Shareholder approval for the issue of up to 10 million Shares.

ASX Listing Rule 7.1

ASX Listing Rule 7.1 provides that (subject to certain exceptions, none of which is relevant here) prior approval of Shareholders is required for an issue of securities if the securities will, when aggregated with the securities issued by the Company during the previous 12 months, exceed 15% of the number of shares on issue at the commencement of that 12 month period.

For the purposes of ASX Listing Rule 7.3, the following information is provided in relation to Resolution 2 to allow Shareholders to assess the proposed facility for the future issue of up to 10,000,000 Shares:

• the maximum number of Shares which may be allotted and issued is 10,000,000; $(a)$
• (b) the Shares the subject of Resolution 2 will be issued and allotted no later than three (3) months after the date of this Meeting or such later date as approved by ASX;
• the issue price of the Shares proposed to be allotted and issued will be not less than 80% of the average market price $(c)$ of Shares on ASX over the last 5 days on which sales in the Shares were recorded before the date of the prospectus pursuant to which the Shares will be issued;
• $(d)$ the allottees in respect of Resolution 2 are not, as yet, identifiable, but will be subscribers to be identified by the Company and any brokers appointed by the Company to manage the issue;

Explanatory Jtatement

$\tilde{\mathscr{S}}$

• the Shares to be issued will rank pari-passu on allotment and issue with the existing Shares of the Company; $(e)$
• the Shares to be issued will be allotted progressively as allottees are identified, however no Shares will be issued or $f\hat{h}$ allotted after the date which is three (3) months after the date of the Meeting.
• the Company intends to use the funds raised by the issue of Shares the subject of Resolution 2, for the $(g)$ commencement of development of mining operations on the Kunanalling Project. Any surplus funds will be used for general working capital purposes, review and analysis of new projects and for the funding of the Company's existing activities.

$\mathbf{R}$ RESOLUTION 3 - GRANT OF DIRECTORS OPTIONS TO MR MCMAHON

Resolution 3 seeks the approval of members to grant 1,000,000 Directors Options to Mr McMahon.

Shareholder approval of the grant of the options the subject of Resolution 3 is sought for the purposes of:

• 1. Part 2E.1 of the Corporations Act, which governs the giving of financial benefits to directors and other "related parties" of a company; and
• 1. ASX Listing Rule 10.11, which provides that, subject to certain exceptions (none of which are relevant here), a company must not issue or grant securities to a director without shareholder approval.

The object of Resolution 3 is to provide Mr McMahon with a mechanism to participate in the future development of the Company and an incentive for his future involvement with and commitment to the Company.

If shareholder approval is obtained, the options will be granted within 1 month of shareholder approval.

Terms of Options

Subject to shareholder approval, the Director's Options will be granted on the terms and conditions set out in Annexure "A" to this Explanatory Statement.

Part 2E.1 of the Corporations Act

Part 2E.1 of the Corporations Act prohibits the Company from giving financial benefit to a "related party" of the Company (such as a director) unless either:

• a. the giving of the financial benefit falls within one of the nominated exceptions to the relevant provisions of the Corporations Act; or
• b. prior shareholder approval is obtained to the giving of the benefit.

The object of Part 2E.1 of the Corporations Act is the protection of public companies resources.

For the purposes of Part 2E.1, Mr McMahon (or his nominee) is considered to be a related party of the Company and, therefore, the proposed grant of Directors' Options to him (or his nominee) requires prior shareholder approval.

Explanatory Jtatement

Eagaly Resources Limited

1

An aggregate amount of \$75,000 per annum (exc. GST) is due and payable to Kingsreef Pty Ltd. a company controlled by Mr Nathan McMahon, for the provision of corporate and tenement management services to the Company. Mr McMahon receives no other remuneration or superannuation from Cazaly Resources Ltd.

Mr McMahon currently has a beneficial interest in the following securities of Cazaly Resources Limited:

		Number	Percent of Issued Capital
	• Fully paid ordinary shares:	4.043.784	12.20%
	• 31 lanuary 2006 20 cent Options	1,069,773
	* 28 February 2005 35 cent Options	1,500,000
$\bullet$ .	30 June 2005 40 cent Options	1.500.000

In accordance with the requirements of Part 2E.1 and, in particular, sections 219 and 221 of the Corporations Act, the following information is provided to shareholders to allow them to assess the proposed grant of options:

• 1. being a Director, Mr McMahon is a related party of the Company to whom the financial benefit would be given by virtue of section 228(2)(a) of the Corporations Act (or in the case of his nominee, section 228(4) of the Corporations Act);
• 1. the nature of the financial benefit to be given is the grant of 1,000,000 Directors' Options on the terms set out in Annexure "A" to this Explanatory Statement;
• 1. Mr McMahon is not entitled and does not wish to make a recommendation to Shareholders regarding Resolution 3 on the basis that he has an interest in the outcome of the Resolution:
• 1. Messrs Jones and Hunter, recommend that Shareholders vote in favour of Resolution 3 on the basis the Directors' Options to be granted provide Mr McMahon with an appropriate incentive for his future commitment to the Company;
• 1. the Director's Options are to be granted for no consideration;
• 1. an estimate of the value of the Director's Options is set out in Annexure "B" to this Explanatory Statement;
• 1. neither the Directors nor the Company are aware of any other information that would be reasonably required by shareholders to make a decision as to whether it is in the best interests of the Company to pass the Resolution other than as follows:
• (a) if all the options the subject of Resolutions 3, 4, and 5 are granted and exercised, then the Company's fully paid share capital will be diluted by approximately 6.79% (based on the existing number of Shares). The Company will, however, receive subscription monies totaling \$900,000. If, however, only the Directors' Options, the subject of this Resolution 3, are exercised, then the Company's fully paid share capital will be diluted by approximately 3.02% (based on the existing number of Shares). The Company will, however, receive subscription monies totaling \$400,000.
• (b) the Directors consider that the incentive represented by the grant of Directors' Options is a cost effective and efficient incentive when compared to other forms of incentive such as cash, bonuses or increased remuneration; and
• (c) the primary purpose of the grant of Directors' Options is to provide an incentive to Mr McMahon. Given this purpose, the Directors do not consider that there is any opportunity cost or benefit foregone to the

Explanatory Jtatement

Eajaly Resources Limited

Ÿ

Company in granting the Director's Options, the subject of Resolution 3.

ASX Listing Rule 10.11

ASX Listing Rule 10.11 provides that, subject to certain exemptions (none of which are relevant here), a company must not issue options to a related party without shareholder approval. Resolution 3 seeks this approval.

Information required for the purposes of ASX Listing Rule 10.13 in relation to the Shareholder approval sought under ASX Listing Rule 10.11 is provided in the Resolution and the notes above.

$\overline{4}$ . RESOLUTION 4 - GRANT OF DIRECTORS OPTIONS TO MR JONES

Resolution 4 seeks the approval of members to grant 1,000,000 Directors Options to Mr lones.

Shareholder approval of the grant of the options the subject of Resolution 4 is sought for the purposes of:

• 1. Part 2E.1 of the Corporations Act, which governs the giving of financial benefits to directors and other "related parties" of a company; and
• 1. ASX Listing Rule 10.11, which provides that, subject to certain exceptions (none of which are relevant here), a company must not issue or grant securities to a director without shareholder approval.

The object of Resolution 4 is to provide Mr Jones with a mechanism to participate in the future development of the Company and an incentive for his future commitment to the Company.

If shareholder approval is obtained, the options will be granted within 1 month of shareholder approval.

Terms of Options

Subject to shareholder approval, the Directors' Options will be granted on the terms and conditions set out in Annexure "A" to this Explanatory Statement.

Part 2E.1 of the Corporations Act

Part 2E.1 of the Corporations Act prohibits the Company from giving financial benefit to a "related party" of the Company (such as a director) unless either:

• (a) the giving of the financial benefit falls within one of the nominated exceptions to the relevant provisions of the Corporations Act; or
• (b) prior shareholder approval is obtained to the giving of the benefit.

The object of Part 2E.1 of the Corporations Act is the protection of public companies resources.

For the purposes of Part 2E.1, Mr Jones (or his nominee) is considered to be a related party of the Company and, therefore, the proposed grant of Directors' Options to him (or his nominee) requires prior Shareholder approval.

An aggregate amount of \$150,000 per annum (exc. GST) is due and payable to Widerange Corporation Pty Ltd, a

Explanatory Jtatement

Eagaly Resources Limited
ARN 93 101 010 334

company controlled by Mr Clive Jones, for the provision of geological services to the Company. Mr Jones receives no other remuneration or superannuation from Cazaly Resources Ltd.

Mr Jones currently has a beneficial interest in the following securities of Cazaly Resources Limited:

	Number	Percent of Issued Capital
• Fully paid ordinary shares:	3.270.000	9.86%
* 31 January 2006 20 cent Options	1.050.000
* 28 February 2005 35 cent Options	1,000,000
* 30 June 2005 40 cent Options	1,000,000

In accordance with the requirements of Part 2E.1 and, in particular, sections 219 and 221 of the Corporations Act, the following information is provided to shareholders to allow them to assess the proposed grant of options:

• 1. being a Director, Mr Jones is a related party of the Company to whom the financial benefit would be given by virtue of section $228(2)(a)$ of the Corporations Act (or in the case of his nominee, section $228(4)$ of the Corporations Act);
• 1. the nature of the financial benefit to be given is the grant of 1,000,000 Directors' Options on the terms set out in Annexure "A" to this Explanatory Statement;
• 1. Mr lones is not entitled, and does not wish, to make a recommendation to Shareholders regarding Resolution 4 on the basis that he has an interest in the outcome of the Resolution:
• 1. Messrs McMahon and Hunter recommend that Shareholders vote in favour of Resolution 4 on the basis the Directors' Options to be granted provide Mr lones with an appropriate incentive for his future commitment to the Company;
• 1. the Directors' Options are to be granted for no consideration;
• 1. an estimate of the value of the Directors' Options is set out in Annexure "B" to this Explanatory Statement;
• 1. neither the Directors nor the Company are aware of any other information that would be reasonably required by shareholders to make a decision as to whether it is in the best interests of the Company to pass the Resolution other than as follows:
• (a) if all the options the subject of Resolutions 3, 4, and 5 are granted and exercised, then the Company's fully paid share capital will be diluted by approximately 6.79% (based on the existing number of Shares). The Company will, however, receive subscription monies totaling \$900,000. If, however, only the Directors' Options, the subject of this Resolution 3, are exercised, then the Company's fully paid share capital will be diluted by approximately 3.02% (based on the existing number of Shares). The Company will, however, receive subscription monies totaling \$400,000.
• (b) the Directors consider that the incentive represented by the grant of Directors' Options is a cost effective and efficient incentive when compared to other forms of incentive such as cash, bonuses or increased remuneration; and
• (c) the primary purpose of the grant of Directors' Options is to provide an incentive to Mr Jones. Given this purpose, the Directors do not consider that there is any opportunity cost or benefit foregone to the Company in granting the Directors' Options, the subject of Resolution 4.

ASX Listing Rule 10.11

Explanatory Jtatement

$\mathcal{L}$

Eagaly Resources Limited
ABN 23 101 049 334

ASX Listing Rule 10.11 provides that, subject to certain exemptions, (none of which are relevant here), a company must not issue options to a related party without shareholder approval. Resolution 4 seeks this approval.

Information required for the purposes of ASX Listing Rule 10.13 in relation to the Shareholder approval sought under ASX Listing Rule 10.11 is provided in the Resolution and the notes above.

$5.$ RESOLUTION 5 - GRANT OF DIRECTORS OPTIONS TO MR HUNTER

Resolution 5 seeks the approval of members to grant 250,000 Directors Options to Mr Hunter.

Shareholder approval of the grant of the options the subject of Resolution 5 is sought for the purposes of:

• 1. Part 2E.1 of the Corporations Act, which governs the giving of financial benefits to directors and other "related parties" of a company; and
• 1. ASX Listing Rule 10.11, which provides that, subject to certain exceptions (none of which are relevant here), a company must not issue or grant securities to a director without shareholder approval.

The object of Resolution 5 is to provide Mr Hunter with a mechanism to participate in the future development of the Company and an incentive for his future commitment to the Company.

If shareholder approval is obtained, the options will be granted within 1 month of shareholder approval.

Terms of Options

Subject to shareholder approval, the Directors' Options will be granted on the terms and conditions set out in Annexure "A" to this Explanatory Statement.

Part 2E.1 of the Corporations Act

Part 2E.1 of the Corporations Act prohibits the Company from giving financial benefit to a "related party" of the Company (such as a director) unless either:

• the giving of the financial benefit falls within one of the nominated exceptions to the relevant provisions of $(a)$ the Corporations Act; or
• prior shareholder approval is obtained to the giving of the benefit. (b)

The object of Part 2E.1 of the Corporations Act is the protection of public companies resources.

For the purposes of Part 2E.1, Mr Hunter (or his nominee) is considered to be a related party of the Company and, therefore, the proposed grant of Directors' Options to him (or his nominee) requires prior Shareholder approval.

An aggregate amount of \$24,000 per annum (exc. GST) is due and payable to Mining Corporate Advisory Services

Explanatory of tatement

11

Egaly Resources Limited

Pty Ltd, a company controlled by Mr Hunter, for the provision of company secretarial services to the Company. Mr Hunter receives a non-executive Director's fee of \$25,000 per annum and superannuation of \$2,250 per annum.

Mr Hunter currently has a beneficial interest in the following securities of Cazaly Resources Limited:

	Number	Percent of
		Issued Capital
Fully paid ordinary shares: I	827.300	2.50%
31 January 2006 20 cent Options	275,767
* 28 February 2005 35 cent Options	nil
* 30 June 2005 40 cent Options	nil

In accordance with the requirements of Part 2E.1 and, in particular, sections 219 and 221 of the Corporations Act, the following information is provided to shareholders to allow them to assess the proposed grant of options:

• 1. being a Director, Mr Hunter is a related party of the Company to whom the financial benefit would be given by virtue of section $228(2)(a)$ of the Corporations Act (or in the case of his nominee, section $228(4)$ of the Corporations Act):
• 1. the nature of the financial benefit to be given is the grant of 250,000 Directors' Options on the terms set out in Annexure "A" to this Explanatory Statement;
• 1. Mr Hunter is not entitled, and does not wish, to make a recommendation to Shareholders regarding Resolution 5 on the basis that he has an interest in the outcome of the Resolution:
• 1. Messrs McMahon and lones recommend that Shareholders vote in favour of Resolution 5 on the basis the Directors' Options to be granted provide Mr Hunter with an appropriate incentive for his future commitment to the Company;
• 1. the Directors' Options are to be granted for no consideration;
• 1. an estimate of the value of the Directors' Options is set out in Annexure "B" to this Explanatory Statement;
• 1. neither the Directors nor the Company are aware of any other information that would be reasonably required by shareholders to make a decision as to whether it is in the best interests of the Company to pass the Resolution other than as follows:
• (a) if all the options the subject of Resolutions 3, 4, and 5 are granted and exercised, then the Company's fully paid share capital will be diluted by approximately 6.79% (based on the existing number of Shares). The Company will, however, receive subscription monies totaling \$900,000. If, however, only the Directors' Options, the subject of this Resolution 3, are exercised, then the Company's fully paid share capital will be diluted by approximately 0.75% (based on the existing number of Shares). The Company will, however, receive subscription monies totaling \$100,000.
• (b) the Directors consider that the incentive represented by the grant of Directors' Options is a cost effective and efficient incentive when compared to other forms of incentive such as cash, bonuses or increased remuneration: and
• (c) the primary purpose of the grant of Directors' Options is to provide an incentive to Mr Hunter. Given this purpose, the Directors do not consider that there is any opportunity cost or benefit foregone to the Company in granting the Directors' Options, the subject of Resolution 5.

Explanatory Jtatement

Eagaly Resources Limited

ASX Listing Rule 10.11

ASX Listing Rule 10.11 provides that, subject to certain exemptions, (none of which are relevant here), a company must not issue options to a related party without shareholder approval. Resolution 5 seeks this approval. Information required for the purposes of ASX Listing Rule 10.13 in relation to the Shareholder approval sought under ASX Listing Rule 10.11 is provided in the Resolution and the notes above.

NOTE: RESOLUTIONS 3,4, & 5

The highest and lowest ASX trading prices of the company's fully paid shares since the Company listed on ASX are:

High:	$29.5$ cents	25 February 2004
Low:	$16.5$ cents	17 August 2004

The highest and lowest ASX trading prices of the company's 20 cent options since the Company listed the options on ASX are: High^® 10 cents 23 & 27 February 2004, I, 2, 9 & 10 March 2004

Low: 5 cents 12, 24 & 25 August 2004

Latest Available trading prices (25 August 2004): Ordinary fully paid shares 17 cents

20 cent options 5 cents

ACTION TO BE TAKEN BY SHAREHOLDERS

Shareholders should read this Explanatory Statement carefully before deciding how to vote on each Resolution.

Attached to the Notice of Meeting is a proxy form for use by Shareholders. Shareholders are invited and encouraged to attend the Meeting or, if they are unable to attend in person, to complete, sign and return the proxy form to the Company in accordance with the instructions contained in the proxy form and the Notice of Meeting. Lodgement of a proxy form will not preclude a shareholder from attending and voting at the Meeting in person.

Enquiries

All enquiries in relation to the contents of the Notice of Meeting or Explanatory Statement should be directed to the Company's Joint Managing Director, Mr Clive Jones or Company Secretary, Mr Kent Hunter (telephone: +61 8 9380 4600).

Explanatory Jtatement

15

Eagaly Resources Limited
ABN 23 101 049 334

GLOSSARY OF TERMS $\mathbf{6}$ .

In this Explanatory Statement:

ACN	Australian Company Number
Cazaly or Company	Cazaly Resources Limited (ABN: 23 101 049 334).
ASIC	Australian Securities and Investments Commission.
ASX	Australian Stock Exchange Limited (ACN 008 624 691)
ASX Listing Rules or Listing Rules	The Official Listing Rules of ASX as amended from time to time.
Corporations Act	The Corporations Act 2001 (Commonwealth).
Director	A director of Cazaly.
Directors Options	An option to subscribe for a Share at an exercise price of 40 cents per share on or before 31 August 2007, and otherwise on the terms set out in Annexure "A" to this Explanatory Statement.
Meeting	The Meeting of the Company to be held on 5 October 2004.
Notice of Meeting	The notice convening the Meeting, which accompanies this Explanatory Statement.
Resolutions	Resolutions in the Notice of Meeting.
Share	A fully paid ordinary share in the capital of the Company.
Shareholder	The registered holder of a Share in the Company.

Jlossary of Terms

$\mathscr{A}$

Eagaly Resources Limited
ABN 23 101 049 334

ANNEXURE "A"

Terms and Conditions of Directors' Options

The terms and conditions of the Directors Options proposed to be allotted and issued and the subject of proposed Resolutions 3, 4 and 5 are as follows:

Each Directors' Option entitles the holder to subscribe for one Share in the capital of the Company at the exercise price of 40 cents per Share.

• b) Subject to paragraph (c) below, the Directors' Options are exercisable at any time up to 5.00pm Perth time on 31 August 2007 by completing a Directors' Option exercise form and delivering it together with the payment for the number of Shares in respect of which the Directors' Options are exercised to the registered office of the Company. Any Directors' Options not exercised by that time will lapse.
• c) A Directors' Option Holder may exercise some only of that person's Directors' Options, which does not affect that holder's right to exercise the remainder of their Directors' Options by the deadline in paragraph (b) above. Directors' Options must be exercised in multiples of 100 at a time, unless the Directors' Option Holder exercises all Directors' Options able to be exercised at that time.
• d) Subject to the Corporations Act, the ASX Listing Rules and the Company's Constitution, the Directors' Options are freely transferable. Application will not be made to ASX for official quotation of the Directors' Options.
• e) All Shares issued upon exercise of the Directors' Options will from the date they are issued, rank pari passu in all respects with the Company's then issued Shares. The Company will apply for official quotation by ASX of all Shares issued upon exercise of the Directors' Options.
• f) Directors' Option Holders cannot participate in new issues of capital offered to Shareholders of the Company during the currency of the Directors' Options without exercising the Directors' Options. However, the Company will ensure that for the purpose of determining entitlements to any such issue, the books closing date will be at least 10 business days after the issue is announced. This will give Directors' Option Holders the opportunity to exercise their Directors' Options prior to the date for determining entitlements to participate in any such issue.
• g) Subject to paragraph (h), if the Company makes a bonus share issue, a rights issue or any other similar issue of rights or entitlements, there will be no adjustment to the exercise price, the number of Shares per Directors' Option or any other terms of those Directors' Options.
• h) In the event of any reorganisation (including consolidation, subdivision, reduction or return) of the issued capital of the Company prior to 31 August 2007 the rights of Directors' Option Holders, including the number of Directors' Options or the exercise price of the Directors' Options or both will be changed to the extent necessary to comply with the ASX Listing Rules applying to a reorganisation of capital at the time of the reorganisation.
• i) Directors' Option Holders will be sent all communications sent to Shareholders of the Company, but Directors' Options do not confer any rights to attend or vote at meetings of Shareholders of the Company. Notice may be given by the Company to Directors' Option holders in the manner provided by the Company's Constitution for the giving of notices to shareholders, and the relevant provisions of the Company's Constitution apply with all necessary modification to notices to Directors' Option Holders.

Annanna A

Eagaly Resources Limited
ABN 23 101 049 334

ANNEXURE "B"

ESTIMATE OF THE VALUE OF DIRECTORS OPTIONS

An estimate of the value of the Directors' Options that are proposed to be granted (pursuant to the passing of Resolutions 3, 4 and 5) using the Black and Scholes Options Pricing Model has been calculated as set out below:

	Name of Related Party		Number of Options Estimated Value using Black & Scholes Model
Resolution 3	McMahon	000.000.	\$19,120
Resolution 4	lones	1.000.000	\$19,120
Resolution 5	Hunter	250,000	\$4,780

The estimated value of the Directors' Options was calculated using the following assumptions:

• 1. risk free rate of 5.37%;
• 1. current share price of 18 cents;
• 1. dividend yield of 0%;
• 1. forecast volatility of 50%; and
• 1. option exercise price of 40 cents.
• 1. option expiry date of 31 August 2007.

Annerme B

$\overline{\mathscr{C}}$

Eajaly Resources Limited

PROXY FORM

The Secretary Cazaly Resources Limited PO Box 396 WEST PERTH WA 6872

being a member/members of Cazaly Resources Limited (the Company) hereby appoint

Print proxy's name in full

print proxy's address

and (if you wish to appoint two proxies)

print second proxy's name in full

of

оf

print second proxy's address

or, in the proxy's/proxies' absence or if no other appointee is mentioned, the Chairman of the meeting as my/our proxy/proxies to vote for me/us on my/our behalf at the Annual General Meeting of the Company to be held at the Celtic Club, 48 Ord Street, West Perth, Western Australia 6005, at 10.00am, 5 October 2004 and at any adjournment of that meeting in respect of ................................... my/our shares.

If you do not wish to direct your proxy how to vote, please place a mark in the box. By marking this box, you acknowledge that the Chairman may exercise your proxy even if he has an interest in the outcome of the resolution and votes cast by him other than as proxy holder will be disregarded because of that interest.

Proxies appointing the Chairman which do not specify the way in which the proxy is to vote will be recorded as a vote in favour of the resolution.

If you wish to indicate how your proxy is to vote, please tick the appropriate places below. If no indication is given on a resolution, the proxy may abstain or vote at his or her discretion. I/We direct my/our proxy to vote as indicated below:

ORDINARY BUSINESS
RESOLUTION	FOR	AGAINST	ABSTAIN
1. Election of Director
2. Approval to the Future Placement of Shares
3. Grant Of Options To Mr McMahon
4. Grant Of Options To Mr Jones
5. Grant Of Options To Mr Hunter

• 1. If you have appointed two proxies the proportion of your voting rights allocated to each proxy is: Note: Proxy No. I % Proxy No. 2 %.
• 1. If the appointment of a proxy is signed by the appointor's attorney, this form must be accompanied by the authority under which the appointment was signed, or a certified copy of the authority.

The completed Form of proxy may be:

• Mailed to the address on this form; or
• Faxed to the Company on (08) 9381 5911

Eagaly Resources Limited
ABN 23 101 049 334

PROXY FORM

Signed this	day of	2004
If a natural person:
SIGNED by in the presence of:		(Signature)
(Signature of Witness)
(Name of Witness in full)
If a Company:
THE COMMON SEAL of		€
ACN was affixed in the presence of:
(Signature of Secretary/other Director)		(Signature of Director/Sole Director)
(Name of Secretary/other Director in full)		(Name of Director/Sole Director in full)

PROXY VOTES

A vote given in accordance with the terms of an instrument or proxy is valid not withstanding the previous death or unsoundness of mind of the principal, the revocation of the instrument (or the authority under which the instrument was executed), or the transfer of the Share in respect of which the instrument or power is given, if no intimation in writing of the death, unsoundness of mind, revocation or transfer has been received by the Company at the Registered Office before the commencement of the Meeting or adjourned Meeting at which the instrument is used or the power is exercised.

REPRESENTATIVES OF CORPORATE SHAREHOLDERS

A body corporate ("the Appointor") that is a Shareholder may authorise, in accordance with Section 250D of the Corporations Act 2001, by resolution of its Directors or other governing body such person or persons as it may determine to act as its Representative at any Meeting of the Company or of any class of Shareholders. A person so authorised shall be entitled to exercise all the rights and privileges of the Appointor as a Shareholder. When a Representative is present at a Meeting of the Company, the Ap

ACN 101 049 334